Investing 100% into TQQQ

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Topic Author
RichIn7Years
Posts: 157
Joined: Fri Oct 20, 2023 3:37 pm

Re: Investing 100% into TQQQ

Post by RichIn7Years »

Alpha4 wrote: Thu Nov 30, 2023 2:57 am
Kbg wrote: Wed Nov 29, 2023 8:24 pm
Valuethinker wrote: Wed Nov 29, 2023 8:25 am Given the composition of the Nasdaq index I would be very careful about taking historical comparisons back too far.

S&P 500 is more broadly based, and serves as a better, albeit imperfect, proxy for listed US stocks.
Some thoughts on your thoughts.

Both indexes have long published rules and the stats are what the stats are. They clearly are not the same indexes and the tradeoffs are clear per my previous post. However, given the competitiveness of the Nasdaq as an exchange vs. the NYSE, the really big companies have resided in both indexes (and exchanges) for quite a while.

Both are large cap indexes and I don't think either is a great proxy for all listed US stocks. There are several indexes that are far superior total US market indexes...so if one wants that, then they should invest in an instrument/index that provides that.

I should have posted this earlier...but I think it nicely summarizes, for me, the bottom line between the two: Gain/Loss Ratio QQQ 1.15/SPY 0.85

When the market is doing well, you just normally get more upside and about the same downside (internet bubble excepted). And, since the market is in a bull market 70% of the time that's why I'm a Nasdaq 100 fan. (Ok, I just crossed the salesman line :D )
Although I should like to add to your post that--assuming your source is the same as mine which I'm pretty certain it is since that's the only place I know of to get daily NASDAQ-100 data back to late 1972--the "even further back" simulated NASDAQ-100 proxy they used back to 1926 is also available; I have computed triple leveraged daily returns on it (for daily borrowing costs I used the commercial paper rate plus 0.38% and then divided by 253 since 253 trading days in a year) and the triple-leveraged version (i.e. simulated TQQQ) had five down years in a row from 1937 to 1941 (and to boot the recovery in 1942 from June to December was only enough to give a slightly positive 1942; vol decay hurt this one badly in the first part of 1942). Granted, 1943 to 1945 this one did stunningly (as it did from 1949 to 1959...although 1957 was rough) but I thought it was worth mentioning that theoretically it would've have five down years in a row as that could be so depressing as to cause someone to give up at the exact point--late 1941 to mid-1942--when they should've instead been aggressively buying.

Can you link the data? I made a simulated TQQQ index but it would be nice to double check the numbers for sanity
Topic Author
RichIn7Years
Posts: 157
Joined: Fri Oct 20, 2023 3:37 pm

Re: Investing 100% into TQQQ

Post by RichIn7Years »

Kbg wrote: Tue Nov 28, 2023 10:21 pm Found this for another take with some data (and same as my bottom line)

https://www.etmoney.com/learn/stocks/na ... in-the-us/
I prefer qqq partly because it’s closer to a true market cap allocation. Market cap weight limits are completely arbitrary and represent an inefficiency as these big companies become increasingly diversified and ubiquitous.
rockstar
Posts: 6943
Joined: Mon Feb 03, 2020 5:51 pm

Re: Investing 100% into TQQQ

Post by rockstar »

RichIn7Years wrote: Thu Nov 30, 2023 10:22 pm
Kbg wrote: Tue Nov 28, 2023 10:21 pm Found this for another take with some data (and same as my bottom line)

https://www.etmoney.com/learn/stocks/na ... in-the-us/
I prefer qqq partly because it’s closer to a true market cap allocation. Market cap weight limits are completely arbitrary and represent an inefficiency as these big companies become increasingly diversified and ubiquitous.
What have you done so far with this strategy? Are you currently 100% in TQQQ?
Topic Author
RichIn7Years
Posts: 157
Joined: Fri Oct 20, 2023 3:37 pm

Re: Investing 100% into TQQQ

Post by RichIn7Years »

rockstar wrote: Fri Dec 01, 2023 1:34 pm
RichIn7Years wrote: Thu Nov 30, 2023 10:22 pm
Kbg wrote: Tue Nov 28, 2023 10:21 pm Found this for another take with some data (and same as my bottom line)

https://www.etmoney.com/learn/stocks/na ... in-the-us/
I prefer qqq partly because it’s closer to a true market cap allocation. Market cap weight limits are completely arbitrary and represent an inefficiency as these big companies become increasingly diversified and ubiquitous.
What have you done so far with this strategy? Are you currently 100% in TQQQ?
I decided to buy TMF a few weeks ago so now I’m 80% TQQQ 20% TMF in my taxable. My taxable is 85% of my equities NW, with 15%, my 401k, in VLXVX.

Doing well so far, QQQ is defying gravity but I do think there are still potential large drawdowns down the line.
Alpha4
Posts: 185
Joined: Tue Apr 17, 2012 8:47 pm

Re: Investing 100% into TQQQ

Post by Alpha4 »

RichIn7Years wrote: Thu Nov 30, 2023 10:20 pm
Alpha4 wrote: Thu Nov 30, 2023 2:57 am
Kbg wrote: Wed Nov 29, 2023 8:24 pm
Valuethinker wrote: Wed Nov 29, 2023 8:25 am Given the composition of the Nasdaq index I would be very careful about taking historical comparisons back too far.

S&P 500 is more broadly based, and serves as a better, albeit imperfect, proxy for listed US stocks.
Some thoughts on your thoughts.

Both indexes have long published rules and the stats are what the stats are. They clearly are not the same indexes and the tradeoffs are clear per my previous post. However, given the competitiveness of the Nasdaq as an exchange vs. the NYSE, the really big companies have resided in both indexes (and exchanges) for quite a while.

Both are large cap indexes and I don't think either is a great proxy for all listed US stocks. There are several indexes that are far superior total US market indexes...so if one wants that, then they should invest in an instrument/index that provides that.

I should have posted this earlier...but I think it nicely summarizes, for me, the bottom line between the two: Gain/Loss Ratio QQQ 1.15/SPY 0.85

When the market is doing well, you just normally get more upside and about the same downside (internet bubble excepted). And, since the market is in a bull market 70% of the time that's why I'm a Nasdaq 100 fan. (Ok, I just crossed the salesman line :D )
Although I should like to add to your post that--assuming your source is the same as mine which I'm pretty certain it is since that's the only place I know of to get daily NASDAQ-100 data back to late 1972--the "even further back" simulated NASDAQ-100 proxy they used back to 1926 is also available; I have computed triple leveraged daily returns on it (for daily borrowing costs I used the commercial paper rate plus 0.38% and then divided by 253 since 253 trading days in a year) and the triple-leveraged version (i.e. simulated TQQQ) had five down years in a row from 1937 to 1941 (and to boot the recovery in 1942 from June to December was only enough to give a slightly positive 1942; vol decay hurt this one badly in the first part of 1942). Granted, 1943 to 1945 this one did stunningly (as it did from 1949 to 1959...although 1957 was rough) but I thought it was worth mentioning that theoretically it would've have five down years in a row as that could be so depressing as to cause someone to give up at the exact point--late 1941 to mid-1942--when they should've instead been aggressively buying.

Can you link the data? I made a simulated TQQQ index but it would be nice to double check the numbers for sanity
I'll see if I can find the actual simulated 3X NASDAQ-100 daily Excel file; I 'm pretty sure I still have it somewhere but it might take me a day or two to find it. Meanwhile, see the links below for a regular (i.e. just 1X daily) version of the NASDAQ-100 simulated proxy back to 1927 and forward to 1983; also see the link below for an actual simulated NASDAQ-100 (i.e. not just a more or less crude proxy like the one from 1927; they actually used the exact same rules and methodology NASDAQ used for the NASDAQ-100 index). I can provide more info on the methodology used for the simulated proxy (the one from 1927 to 1983....BTW I have daily data on it from 1984 to late 2018 if you want that as well) if you wish as well as why--or why not--you may want to use it in backtests and what you might want to use instead; just let me know if you are interested.

Note also that these simulations/proxies are "total return" indexes and include paid and reinvested dividends (not that it much matters for the one from 1927 to 1983, though, since one of the rules the people who created it used in picking stocks for this simulation was that the stocks had to NOT pay a dividend; for the one from 1984 to 1985--the one created using actual NASDAQ-100 methodology--it does include dividends which makes it slightly different from the NASDAQ-100 since that is a PR i.e. price-only index until mid-1999 when both a TR and PR version exist from that point forward).

Also, you mentioned that you yourself you had a "simulated TQQQ"; how did you simulate TQQQ before 1985? The NASDAQ-100 itself was only "officially" incepted in late January or early February of 1985.


Anyway, here is the simulated NASDAQ-100 proxy from 1927 to 1983 daily:

https://filebin.net/1pjxbcoj698uwx75/NA ... f_1983.xls

And here is the "NASDAQ-100" from 1984 to 1985:

https://filebin.net/vva61y4g5j1bm8k1/NA ... _1985_.xls
Topic Author
RichIn7Years
Posts: 157
Joined: Fri Oct 20, 2023 3:37 pm

Re: Investing 100% into TQQQ

Post by RichIn7Years »

Alpha4 wrote: Sat Dec 02, 2023 12:22 am
RichIn7Years wrote: Thu Nov 30, 2023 10:20 pm
Alpha4 wrote: Thu Nov 30, 2023 2:57 am
Kbg wrote: Wed Nov 29, 2023 8:24 pm
Valuethinker wrote: Wed Nov 29, 2023 8:25 am Given the composition of the Nasdaq index I would be very careful about taking historical comparisons back too far.

S&P 500 is more broadly based, and serves as a better, albeit imperfect, proxy for listed US stocks.
Some thoughts on your thoughts.

Both indexes have long published rules and the stats are what the stats are. They clearly are not the same indexes and the tradeoffs are clear per my previous post. However, given the competitiveness of the Nasdaq as an exchange vs. the NYSE, the really big companies have resided in both indexes (and exchanges) for quite a while.

Both are large cap indexes and I don't think either is a great proxy for all listed US stocks. There are several indexes that are far superior total US market indexes...so if one wants that, then they should invest in an instrument/index that provides that.

I should have posted this earlier...but I think it nicely summarizes, for me, the bottom line between the two: Gain/Loss Ratio QQQ 1.15/SPY 0.85

When the market is doing well, you just normally get more upside and about the same downside (internet bubble excepted). And, since the market is in a bull market 70% of the time that's why I'm a Nasdaq 100 fan. (Ok, I just crossed the salesman line :D )
Although I should like to add to your post that--assuming your source is the same as mine which I'm pretty certain it is since that's the only place I know of to get daily NASDAQ-100 data back to late 1972--the "even further back" simulated NASDAQ-100 proxy they used back to 1926 is also available; I have computed triple leveraged daily returns on it (for daily borrowing costs I used the commercial paper rate plus 0.38% and then divided by 253 since 253 trading days in a year) and the triple-leveraged version (i.e. simulated TQQQ) had five down years in a row from 1937 to 1941 (and to boot the recovery in 1942 from June to December was only enough to give a slightly positive 1942; vol decay hurt this one badly in the first part of 1942). Granted, 1943 to 1945 this one did stunningly (as it did from 1949 to 1959...although 1957 was rough) but I thought it was worth mentioning that theoretically it would've have five down years in a row as that could be so depressing as to cause someone to give up at the exact point--late 1941 to mid-1942--when they should've instead been aggressively buying.

Can you link the data? I made a simulated TQQQ index but it would be nice to double check the numbers for sanity
I'll see if I can find the actual simulated 3X NASDAQ-100 daily Excel file; I 'm pretty sure I still have it somewhere but it might take me a day or two to find it. Meanwhile, see the links below for a regular (i.e. just 1X daily) version of the NASDAQ-100 simulated proxy back to 1927 and forward to 1983; also see the link below for an actual simulated NASDAQ-100 (i.e. not just a more or less crude proxy like the one from 1927; they actually used the exact same rules and methodology NASDAQ used for the NASDAQ-100 index). I can provide more info on the methodology used for the simulated proxy (the one from 1927 to 1983....BTW I have daily data on it from 1984 to late 2018 if you want that as well) if you wish as well as why--or why not--you may want to use it in backtests and what you might want to use instead; just let me know if you are interested.

Note also that these simulations/proxies are "total return" indexes and include paid and reinvested dividends (not that it much matters for the one from 1927 to 1983, though, since one of the rules the people who created it used in picking stocks for this simulation was that the stocks had to NOT pay a dividend; for the one from 1984 to 1985--the one created using actual NASDAQ-100 methodology--it does include dividends which makes it slightly different from the NASDAQ-100 since that is a PR i.e. price-only index until mid-1999 when both a TR and PR version exist from that point forward).

Also, you mentioned that you yourself you had a "simulated TQQQ"; how did you simulate TQQQ before 1985? The NASDAQ-100 itself was only "officially" incepted in late January or early February of 1985.


Anyway, here is the simulated NASDAQ-100 proxy from 1927 to 1983 daily:

https://filebin.net/1pjxbcoj698uwx75/NA ... f_1983.xls

And here is the "NASDAQ-100" from 1984 to 1985:

https://filebin.net/vva61y4g5j1bm8k1/NA ... _1985_.xls

My simulated TQQQ uses adjusted NDX data and applies the interest rate + expense fee. Thanks a ton for the data tho.
Alpha4
Posts: 185
Joined: Tue Apr 17, 2012 8:47 pm

Re: Investing 100% into TQQQ

Post by Alpha4 »

nisiprius wrote: Thu Nov 30, 2023 1:27 pm
Alpha4 wrote: Thu Nov 30, 2023 2:57 am ...Although I should like to add to your post that--assuming your source is the same as mine which I'm pretty certain it is since that's the only place I know of to get daily NASDAQ-100 data back to late 1972--the "even further back" simulated NASDAQ-100 proxy they used back to 1926 is also available...
How would that even work? That would mean the Curb Exchange (which actually was conducted on the curb, it was too sketchy to have a building). It was so disreputable that its number were literally published with a warning label:
It should be understood that no such reliability attaches to transactions on the "Curb" as to those on the regularly organized stock exchanges... it is out of the question for anyone to vouch for the absolute trustworthiness of the record of "Curb" transactions, and we give it for what it may be worth.
And the Cowles Commission decided that it was too unreliable to include in their monumental compilation of common stock returns from 1871 to 1938.
They didn't actually use data from the curb (later the Amex) until late 1962--which was well into the SEC-regulated era--since that was as far back as CRSP had it available (before late Dec 1972 CRSP provided no info on NASDAQ/OTC stocks and before mid or late 1962 they provided no info--be it price, dividends, splits, etc--on Amex/Curb stocks; any data they have from 1926 to mid-1962 is NYSE only). They were not backtesting the NASDAQ-100 exactly (well, they were from 12-14-1972 but for 1927 to 1972 they were just creating a proxy of sorts for it).

The methodology used was (and this is me remembering it from a thread on the Motley Fool Mechanical Investing board) roughly as follows; they called their index the "Zero-Yield 100" and used is at as a NASDAQ-100 proxy from 12-31-1926 to late 1972 (although FWIW they actually have values for this index--the Zero-Yield 100--all the way from 12-31-1926 to at least 2019 IIRC; their actual NASDAQ-100 simulation only has values for 12-14-1972 to early 2022).

1. Exclude all financial (i.e. bank, insurance, real estate, REIT, financial services) stocks (since the NASDAQ-100 does this too)

2. Of the remaining stocks after step 1 above, exclude any of them that do pay dividends

3. Of the remaining ones after step 3, sort them by market cap.

4. Pick the top 100 by market capitalization (actually in 1926 they started with the top twenty, then the top twenty-five a few years later, then the top thirty about a decade after that.....and so on and so on until by the mid or late 1960s they finally were able to fill it out to the full 100 stocks....apparently back in the day the large majority of stocks did pay at least some dividends and it was relatively harder to find non dividend payers than it is today) and market cap weight them into an index.

5. Repeat the process above every year for the annual index rebalancing/index reconstitution

The rationale for this index methodology was that:

A. By picking non-dividend payers only, you would avoid stodgy boring blue chips and would also avoid value stocks and would instead hopefully be including rapidly growing companies that were spending most of their profits on expansion and growth (rather than paying them out as dividends), and,

B. By going with the top largest companies from the "companies that don't pay dividends" pool you would hopefully be picking successful companies rather than crappy ones (i.e. by avoiding the smaller and least successful companies that didn't pay dividends you would theoretically be avoiding the companies that didn't pay a dividend not because they were spending their profits on expansion/R&D/capex/technology improvement/manufacturing capacity/etc but because they were unprofitable and thus didn't even have money to pay dividends to begin with).

My own personal opinion is that their index might be OK as a very crude proxy but it has a few major issues that make it not the best choice for a NASDAQ-100 simulation for any time before the early 1980s; since this thread is not specifically about this index I won't thread-jack it further but suffice it to say, the Zero-Yield 100 has several rather glaring issues (starting with the fact that "company that doesn't pay dividends" indicated something rather different in the 1930s/early 1940s than it indicates today).

Bottom line: Before maybe 1984 or so I wouldn't use any proxy index like this; probably a far more realistic proxy for the NASDAQ-100 could be assembled just by using a blend of several of the data sets freely available on the Ken French data library web site.
Topic Author
RichIn7Years
Posts: 157
Joined: Fri Oct 20, 2023 3:37 pm

Re: Investing 100% into TQQQ

Post by RichIn7Years »

Small update: I have decided against using volatility indicators to buy/sell. Tax implications are very bad with repeated buys and sells of all your holdings.

I did the math on the tax of a simple buy and hold with a constant growth rate r and the tax on having to buy and sell every year, and it turns out that if you buy and sell every year, your annual growth rate is reduced by the % tax where as standard buy and hold, you only pay the % rate when you withdraw. Taxes are applied exponentially if you regularly sell and buy again!

I suspect the reason these volatility strategies even exist is because tax makes it infeasible for most players to implement it.

My only current hedge is a TMF position.
Hydromod
Posts: 1075
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Re: Investing 100% into TQQQ

Post by Hydromod »

RichIn7Years wrote: Thu Dec 07, 2023 5:54 pm Small update: I have decided against using volatility indicators to buy/sell. Tax implications are very bad with repeated buys and sells of all your holdings.

I did the math on the tax of a simple buy and hold with a constant growth rate r and the tax on having to buy and sell every year, and it turns out that if you buy and sell every year, your annual growth rate is reduced by the % tax where as standard buy and hold, you only pay the % rate when you withdraw. Taxes are applied exponentially if you regularly sell and buy again!

I suspect the reason these volatility strategies even exist is because tax makes it infeasible for most players to implement it.

My only current hedge is a TMF position.
I did some testing of a strategy where volatility is used to size the allocation between UPRO and TMF in a risk-budget inverse volatility HFEA. I sized the risk budget to have an equivalent long-term average of 55/45 UPRO/TMF. This had a nice steady growth pattern from the 1980s until hitting 2022, avoiding the worst of the 2000 and 2008 crashes. TQQQ/TMF would have worked similarly.

In long-term backtests, the allocation to UPRO would have fluctuated between ~20% to ~80% over time, usually more like the range of 40 to 65%. I calculated an average tax drag equivalent to an ER of 1 to 3% annually, if the shares sold are preferentially selected according to STL/LTL/LTG/STG like M1 does.

Since there are two assets, there are lots of opportunities to cancel the gains with losses, and some fraction of the shares are never bought or sold. Maybe I did it wrong, but it seems like the tax drag may not be nearly as bad as you are making it out to be with careful approaches.
Kbg
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Joined: Thu Mar 23, 2017 11:33 am

Re: Investing 100% into TQQQ

Post by Kbg »

RichIn7Years wrote: Thu Dec 07, 2023 5:54 pm Small update: I have decided against using volatility indicators to buy/sell. Tax implications are very bad with repeated buys and sells of all your holdings.

I did the math on the tax of a simple buy and hold with a constant growth rate r and the tax on having to buy and sell every year, and it turns out that if you buy and sell every year, your annual growth rate is reduced by the % tax where as standard buy and hold, you only pay the % rate when you withdraw. Taxes are applied exponentially if you regularly sell and buy again!

I suspect the reason these volatility strategies even exist is because tax makes it infeasible for most players to implement it.

My only current hedge is a TMF position.
I've spent a ton of time exploring various timing methods including volatility and just couldn't find anything I felt was durable, so I think you made a good choice. I believe a better approach is to work on an allocation that puts the risk needle in whatever your comfort zone is. Of course the past two years made a mockery of that as well. :D :oops:
rockstar
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Joined: Mon Feb 03, 2020 5:51 pm

Re: Investing 100% into TQQQ

Post by rockstar »

RichIn7Years wrote: Thu Dec 07, 2023 5:54 pm Small update: I have decided against using volatility indicators to buy/sell. Tax implications are very bad with repeated buys and sells of all your holdings.

I did the math on the tax of a simple buy and hold with a constant growth rate r and the tax on having to buy and sell every year, and it turns out that if you buy and sell every year, your annual growth rate is reduced by the % tax where as standard buy and hold, you only pay the % rate when you withdraw. Taxes are applied exponentially if you regularly sell and buy again!

I suspect the reason these volatility strategies even exist is because tax makes it infeasible for most players to implement it.

My only current hedge is a TMF position.
No idea how you’re not going to have to sell if volatility spikes a lot. I’ve held my current position since March. Volatility remains pretty low this year. But at some point in the future it’s gonna spike, and I’m going to have to sell my position and pay the tax man. This is why I’m only 2.5% in this strategy. It’s much easier to buy and hold funds that aren’t leveraged. This strategy is good if you want to buy a car or make some quick vacation money. But I wouldn’t bet the house on it.
Topic Author
RichIn7Years
Posts: 157
Joined: Fri Oct 20, 2023 3:37 pm

Re: Investing 100% into TQQQ

Post by RichIn7Years »

Hydromod wrote: Fri Dec 08, 2023 6:14 am
RichIn7Years wrote: Thu Dec 07, 2023 5:54 pm Small update: I have decided against using volatility indicators to buy/sell. Tax implications are very bad with repeated buys and sells of all your holdings.

I did the math on the tax of a simple buy and hold with a constant growth rate r and the tax on having to buy and sell every year, and it turns out that if you buy and sell every year, your annual growth rate is reduced by the % tax where as standard buy and hold, you only pay the % rate when you withdraw. Taxes are applied exponentially if you regularly sell and buy again!

I suspect the reason these volatility strategies even exist is because tax makes it infeasible for most players to implement it.

My only current hedge is a TMF position.
I did some testing of a strategy where volatility is used to size the allocation between UPRO and TMF in a risk-budget inverse volatility HFEA. I sized the risk budget to have an equivalent long-term average of 55/45 UPRO/TMF. This had a nice steady growth pattern from the 1980s until hitting 2022, avoiding the worst of the 2000 and 2008 crashes. TQQQ/TMF would have worked similarly.

In long-term backtests, the allocation to UPRO would have fluctuated between ~20% to ~80% over time, usually more like the range of 40 to 65%. I calculated an average tax drag equivalent to an ER of 1 to 3% annually, if the shares sold are preferentially selected according to STL/LTL/LTG/STG like M1 does.

Since there are two assets, there are lots of opportunities to cancel the gains with losses, and some fraction of the shares are never bought or sold. Maybe I did it wrong, but it seems like the tax drag may not be nearly as bad as you are making it out to be with careful approaches.
By volatility I mean something like buy/sell entire portfolio with the 200 DMA, not risk parity. Also I think I’m transferring my assets to M1. Seems like a great brokerage for my strategies.
Hydromod
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Re: Investing 100% into TQQQ

Post by Hydromod »

RichIn7Years wrote: Fri Dec 08, 2023 11:06 am By volatility I mean something like buy/sell entire portfolio with the 200 DMA, not risk parity. Also I think I’m transferring my assets to M1. Seems like a great brokerage for my strategies.
Yes, I understand your strategy. I was just trying to gently steer you in a direction that I personally find more sustainable and reliable over long periods with respect to taxes.

And M1 should do you fine.
jarjarM
Posts: 2571
Joined: Mon Jul 16, 2018 1:21 pm

Re: Investing 100% into TQQQ

Post by jarjarM »

rockstar wrote: Fri Dec 08, 2023 8:49 am
RichIn7Years wrote: Thu Dec 07, 2023 5:54 pm Small update: I have decided against using volatility indicators to buy/sell. Tax implications are very bad with repeated buys and sells of all your holdings.

I did the math on the tax of a simple buy and hold with a constant growth rate r and the tax on having to buy and sell every year, and it turns out that if you buy and sell every year, your annual growth rate is reduced by the % tax where as standard buy and hold, you only pay the % rate when you withdraw. Taxes are applied exponentially if you regularly sell and buy again!

I suspect the reason these volatility strategies even exist is because tax makes it infeasible for most players to implement it.

My only current hedge is a TMF position.
No idea how you’re not going to have to sell if volatility spikes a lot. I’ve held my current position since March. Volatility remains pretty low this year. But at some point in the future it’s gonna spike, and I’m going to have to sell my position and pay the tax man. This is why I’m only 2.5% in this strategy. It’s much easier to buy and hold funds that aren’t leveraged. This strategy is good if you want to buy a car or make some quick vacation money. But I wouldn’t bet the house on it.
Same feeling here, I held TQQQ for a few years now and went thru some significant drawdown last year and some crazy time in 2020. If one is not ready for 70% drop on the holding, one won't be held on and may end up selling at the wrong time. Also, I too only have it as a small part of my investable assets (<10%). Don't bet the house on it, it's not good for one's mental health, unless this is a YOLO bet.
Tamalak
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Re: Investing 100% into TQQQ

Post by Tamalak »

Since TQQQ's inception it has returned 37% annualized, that is so crazy good that I can see why someone would accept any level of drawdowns to get it. But the time period TQQQ has been active has been insanely good for it - minimal cost of borrowing due to post-2008 rates and a bull market. I can't see this repeating anytime soon..
Topic Author
RichIn7Years
Posts: 157
Joined: Fri Oct 20, 2023 3:37 pm

Re: Investing 100% into TQQQ

Post by RichIn7Years »

Tamalak wrote: Fri Dec 08, 2023 1:48 pm Since TQQQ's inception it has returned 37% annualized, that is so crazy good that I can see why someone would accept any level of drawdowns to get it. But the time period TQQQ has been active has been insanely good for it - minimal cost of borrowing due to post-2008 rates and a bull market. I can't see this repeating anytime soon..
The bull market since 2008 is overstated. It's the longest lasting, but also one of the weakest. In eras with higher interest rates, typically the bull markets went up much more.
james22
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Re: Investing 100% into TQQQ

Post by james22 »

bog007
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Re: Investing 100% into TQQQ

Post by bog007 »

Saw this idea by Joseph Cafariello

It's a 50:50 split between TQQQ and QQQ. (Not 50:50 of our entire portfolio; but of the allocation we give it.) By this I mean relative value trading, where we split our allocation 50:50 between 2 stocks, and rebalance them back to 50:50 weekly or so.



On the way down, cash flows from Q to TQ, snapping up cheaper prices. On the way back up, cash flows from TQ back to Q, with extra gain. This continuous churning between the 2 funds improves their combined dollar-cost average significantly over time.



The best part about a 50:50 pairing is we don't have to try to time our buys and sells. We just look at their values in the morning or last hour of the session, subtract from the leader, add to the trailer, and we're done.
Don’t let anyone else ruin your portfolio. It’s your portfolio. Ruin it yourself!!!
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

james22 wrote: Fri Dec 08, 2023 7:36 pm Respect the most convenient state.

https://collabfund.com/blog/too-much-too-soon-too-fast/
(Schultz (of Starbucks) once reportedly told former WeWork CEO Adam Neumann to slow down growth and focus on quality metrics, to which Neumann responded, “**** that.” Some people learn this the hard way.)
Great citation and thank you!

Except:

1. Neumann blames this on Softbank and Massa Son for pushing him to grow too fast after Softbank invested billions (of Saudi money).

2. Neumann walked away with over $1bn personally. I think what he has "learned" is a "greater fool theory" about investors and their money. And he's started up again (contractually blocked from doing office space) and got lots of funding. PT Barnum would be proud.

I wonder how many of the investors in WeWork "reupped" into the new venture? That would take us back to the Principal-Agent problem. I doubt these investors are playing with their own money.
Everyone knows the investing duo of Warren Buffett and Charlie Munger. But 40 years ago there was a third member, Rick Guerin. The three made investments together. Then Rick kind of disappeared while Warren and Charlie became the most famous investors of all time.

A few years ago hedge fund manager Mohnish Pabrai asked Buffett what happened. Rick, Buffett explained, was highly leveraged and got hit with margin calls in the 1970s bear market.

Buffett told Pabrai:

Charlie and I always knew that we would become incredibly wealthy. We were not in a hurry to get wealthy; we knew it would happen. Rick was just as smart as us, but he was in a hurry.

Too much, too soon, too fast.

Respect the most convenient state.
I did not know that story. Absolutely fascinating.

Long Term Capital Management is, of course, the canonical example of the problem of leverage and "sure thing" bets. They were right, but they couldn't hold the positions long enough to be profit from that (they had exceeded the market size in which they were playing). Eventually the Investment Dealer Brokers (Bear Sterns, Morgan Stanley etc) pulled their credit.
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

jarjarM wrote: Fri Dec 08, 2023 1:46 pm

Same feeling here, I held TQQQ for a few years now and went thru some significant drawdown last year and some crazy time in 2020. If one is not ready for 70% drop on the holding, one won't be held on and may end up selling at the wrong time. Also, I too only have it as a small part of my investable assets (<10%). Don't bet the house on it, it's not good for one's mental health, unless this is a YOLO bet.
The case has been made here that OP should go "all in" on the strategy.

Either they will hit their targets, or they will rebuild from scratch. Either way it will be a great experience for them.
jarjarM
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Re: Investing 100% into TQQQ

Post by jarjarM »

Valuethinker wrote: Sat Dec 09, 2023 11:54 am
jarjarM wrote: Fri Dec 08, 2023 1:46 pm

Same feeling here, I held TQQQ for a few years now and went thru some significant drawdown last year and some crazy time in 2020. If one is not ready for 70% drop on the holding, one won't be held on and may end up selling at the wrong time. Also, I too only have it as a small part of my investable assets (<10%). Don't bet the house on it, it's not good for one's mental health, unless this is a YOLO bet.
The case has been made here that OP should go "all in" on the strategy.

Either they will hit their targets, or they will rebuild from scratch. Either way it will be a great experience for them.
:twisted: :beer :moneybag :oops: Yeah, everyone situation is different and so one should really make decision based on their own risk tolerance and desired goal.
james22
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Re: Investing 100% into TQQQ

Post by james22 »

Valuethinker wrote: Sat Dec 09, 2023 11:54 amThe case has been made here that OP should go "all in" on the strategy.

Either they will hit their targets, or they will rebuild from scratch. Either way it will be a great experience for them.
One study I remember showed that young investors should use 2x leverage in the stock market, because – statistically – even if you get wiped out you’re still likely to earn superior returns over time, as long as you dust yourself off and keep investing after a wipeout. Which, in the real world, no one would actually do. They’d swear off investing for life. What works on a spreadsheet and what works at the kitchen table are ten miles apart.

https://collabfund.com/blog/the-psychology-of-money/
Topic Author
RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

james22 wrote: Sat Dec 09, 2023 7:30 pm Which, in the real world, [/i]no one would actually do. They’d swear off investing for life.


You sound pretty sure of yourself.
Tamalak
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Re: Investing 100% into TQQQ

Post by Tamalak »

RichIn7Years wrote: Sat Dec 09, 2023 8:04 pm
james22 wrote: Sat Dec 09, 2023 7:30 pm Which, in the real world, no one would actually do. They’d swear off investing for life.
You sound pretty sure of yourself.
Yeah Market Timer on this board is a known exception, after his catastrophic run in 2008 using leverage he just dusted himself off and started again, still investing aggressively. Now quite rich.
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dziuniek
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Re: Investing 100% into TQQQ

Post by dziuniek »

It's as if someone missed the hedgefundie adventure....
Get rich or die tryin'
keith6014
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Re: Investing 100% into TQQQ

Post by keith6014 »

you will make a lot of money. what is your exit plan?
Topic Author
RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

keith6014 wrote: Wed Dec 13, 2023 12:43 pm you will make a lot of money. what is your exit plan?
Real estate if we don't build more houses.
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

Tamalak wrote: Mon Dec 11, 2023 11:49 am
RichIn7Years wrote: Sat Dec 09, 2023 8:04 pm
james22 wrote: Sat Dec 09, 2023 7:30 pm Which, in the real world, no one would actually do. They’d swear off investing for life.
You sound pretty sure of yourself.
Yeah Market Timer on this board is a known exception, after his catastrophic run in 2008 using leverage he just dusted himself off and started again, still investing aggressively. Now quite rich.
Having paid back the $1m or so he owed to his family who had bailed him out with his lenders.

And then going to work for a hedge fund.

Arguably, he did not have as much at stake as some of the others who skate in here, with leveraged strategies. I wouldn't want other posters to think they can exactly duplicate Market Timer's personal circumstances.
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

james22 wrote: Sat Dec 09, 2023 7:30 pm
Valuethinker wrote: Sat Dec 09, 2023 11:54 amThe case has been made here that OP should go "all in" on the strategy.

Either they will hit their targets, or they will rebuild from scratch. Either way it will be a great experience for them.
One study I remember showed that young investors should use 2x leverage in the stock market, because – statistically – even if you get wiped out you’re still likely to earn superior returns over time, as long as you dust yourself off and keep investing after a wipeout. Which, in the real world, no one would actually do. They’d swear off investing for life. What works on a spreadsheet and what works at the kitchen table are ten miles apart.

https://collabfund.com/blog/the-psychology-of-money/
I think they would, in fact, do it. I have seen the gambler's mentality at work. They have a "system" and that's all they need.

However they may not find they have the funds. Either due to damage to their credit rating, or career or other personal issues.

When you are young most people don't have much capital. Even diligent savers are usually saving for a house, a car, to pay off student loans etc.

By the time you have sufficient free cash flow for investing you are well into middle age *if* you don't get sick, don't get divorced, don't wind up in a career area that technology & economic change kills (publishing, journalism, retail etc), don't have to live in a high cost of living city, etc.

What young people really need to do is divert some flow of savings into very long term investing.* Then, long only, accepting the high volatility of primarily equity portfolios, assuming low Expense Ratios, they have a chance of having a decent chunk of change 40 years later when retirement beckons.

"Leverage"? That's pretty much an impractical theoretical construct. The risk of a wipeout is just too great. Capital markets throw horrors - decades of abysmal performance. And brief and brutal bear markets that shake out all the leveraged and over-exposed.

* hence I am a big fan of mandatory pension plan contributions (401ks in US-speak). As long as there are some kind of controls on expense ratios, and broadly diversified funds on offer.
Topic Author
RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

Valuethinker wrote: Wed Dec 13, 2023 3:35 pm
james22 wrote: Sat Dec 09, 2023 7:30 pm
Valuethinker wrote: Sat Dec 09, 2023 11:54 amThe case has been made here that OP should go "all in" on the strategy.

Either they will hit their targets, or they will rebuild from scratch. Either way it will be a great experience for them.
One study I remember showed that young investors should use 2x leverage in the stock market, because – statistically – even if you get wiped out you’re still likely to earn superior returns over time, as long as you dust yourself off and keep investing after a wipeout. Which, in the real world, no one would actually do. They’d swear off investing for life. What works on a spreadsheet and what works at the kitchen table are ten miles apart.

https://collabfund.com/blog/the-psychology-of-money/
I think they would, in fact, do it. I have seen the gambler's mentality at work. They have a "system" and that's all they need.

However they may not find they have the funds. Either due to damage to their credit rating, or career or other personal issues.

When you are young most people don't have much capital. Even diligent savers are usually saving for a house, a car, to pay off student loans etc.

By the time you have sufficient free cash flow for investing you are well into middle age *if* you don't get sick, don't get divorced, don't wind up in a career area that technology & economic change kills (publishing, journalism, retail etc), don't have to live in a high cost of living city, etc.

What young people really need to do is divert some flow of savings into very long term investing.* Then, long only, accepting the high volatility of primarily equity portfolios, assuming low Expense Ratios, they have a chance of having a decent chunk of change 40 years later when retirement beckons.

"Leverage"? That's pretty much an impractical theoretical construct. The risk of a wipeout is just too great. Capital markets throw horrors - decades of abysmal performance. And brief and brutal bear markets that shake out all the leveraged and over-exposed.

* hence I am a big fan of mandatory pension plan contributions (401ks in US-speak). As long as there are some kind of controls on expense ratios, and broadly diversified funds on offer.
A lot of assumptions here. Are they correct assumptions?
james22
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Re: Investing 100% into TQQQ

Post by james22 »

Valuethinker wrote: Wed Dec 13, 2023 3:35 pm
james22 wrote: Sat Dec 09, 2023 7:30 pm
Valuethinker wrote: Sat Dec 09, 2023 11:54 amThe case has been made here that OP should go "all in" on the strategy.

Either they will hit their targets, or they will rebuild from scratch. Either way it will be a great experience for them.
One study I remember showed that young investors should use 2x leverage in the stock market, because – statistically – even if you get wiped out you’re still likely to earn superior returns over time, as long as you dust yourself off and keep investing after a wipeout. Which, in the real world, no one would actually do. They’d swear off investing for life. What works on a spreadsheet and what works at the kitchen table are ten miles apart.

https://collabfund.com/blog/the-psychology-of-money/
I think they would, in fact, do it. I have seen the gambler's mentality at work. They have a "system" and that's all they need.
Possibly.

But it's now a different game - the consequences of failing a second time are greater than the first (older, the hole deeper).
tco
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Re: Investing 100% into TQQQ

Post by tco »

Hey Rich, i was reading this thread on TQQQ and it seems we have similar thoughts about LETFs, volatility decay being overhyped, backtesting with in/out strategies, etc. I came to similar conclusions about an in/out strategy: 1) tax issues, although I then considered this working in tax-deferred accounts, and 2) buy/hold often having better returns.

In my backtesting, I didn't just use the maximum period of my simulation and take that single number as gospel either. I tested every 15, 20 and 25 year period, then I tried to find the worst possible periods, etc.

Anyway, just wanted to say thanks for starting this post. As someone who kept reading about the dangers of volatility decay, but not seeing those dangers in my testing (of course I see how it works, but I also see it in context), it's nice to see someone who actually thought through it.
Topic Author
RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

Quick Update: Current Portfolio value: $310k, ~10% of this is my 401k. ~16% of the portfolio is in bonds - will rebalance this eventually, probably sometime before eoy or right at stat of next. Total return is ~80%. over the course of roughly 1.5 years (Note I have contributed a fair amount over the last 1.5 years). Luckily a lot of my original investment theses about AI have played out so far. Will see where this goes in the longer term.
Last edited by RichIn7Years on Wed Jun 12, 2024 12:05 pm, edited 1 time in total.
rockstar
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Re: Investing 100% into TQQQ

Post by rockstar »

I have less than 5% of my portfolio in TQQQ. I've been in it for a little bit over a year. This is the longest I've held it.

I can't imagine going all in on this trade. Of course, I can't get my head around Roaring Kitty's portfolio either.

You need a super high risk tolerance. And you have to realize your losses can be substantial. It wasn't too long ago that TQQQ tanked badly. And while QQQ has come back and made new highs, TQQQ still hasn't reclaimed its high.

Good luck. I don't have the risk tolerance for a substantial position in TQQQ.
Topic Author
RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

rockstar wrote: Mon Jun 10, 2024 7:47 pm I have less than 5% of my portfolio in TQQQ. I've been in it for a little bit over a year. This is the longest I've held it.

I can't imagine going all in on this trade. Of course, I can't get my head around Roaring Kitty's portfolio either.

You need a super high risk tolerance. And you have to realize your losses can be substantial. It wasn't too long ago that TQQQ tanked badly. And while QQQ has come back and made new highs, TQQQ still hasn't reclaimed its high.

Good luck. I don't have the risk tolerance for a substantial position in TQQQ.
Even since my last post my portfolio has whipsawed a few times.
muffins14
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Re: Investing 100% into TQQQ

Post by muffins14 »

RichIn7Years wrote: Mon Jun 10, 2024 7:34 pm Quick Update: Current Portfolio value: $290k, ~10% of this is my 401k. ~16% of the portfolio is in bonds - will rebalance this eventually, probably sometime before eoy or right at stat of next. Total return is ~80%. over the course of roughly 1.5 years (Note I have contributed a fair amount over the last 1.5 years). Luckily a lot of my original investment theses about AI have played out so far. Will see where this goes in the longer term.
It would have more sense to me if you invested in a tech fund or a fund of AI companies, or several individual stocks from AI companies. Tracking the NASDAQ just seems to muddy the waters to me. I never understood why people would be in favor of QQQ/TQQQ on a theoretical level
Crom laughs at your Four Winds
garlandwhizzer
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Re: Investing 100% into TQQQ

Post by garlandwhizzer »

100% in a 3X QQQ concentrates maximally in what has been a dominant market segment, mega-cap tech), for a long time and it further leverages it up maximally. That is to say, it is the opposite of wide diversification by sector and style. That does not mean it is destined to fail over the investor's time frame. It could do just the opposite and the winning horse in the race could continue to keep winning well into the future. This approach carries much greater potential risk and likewise much greater potential reward than more diversified investing approaches. Many students of the market would argue that it's loading up maximally on the current risk of the most overvalued segment of the market, leveraging it up also, at precisely the wrong time in the last stages of a very long tech driven bull market. Historically these things don't go on forever. TQQQ investors might respond that they've been hearing that same tune for 15 and it's been dead wrong. The overpriced tech winners have kept winning and the very cheap value losers have been left in the dust.

No one at present knows with certainty which of these two opposite fates will win out going forward. Allocating 100% to TQQQ says a lot more about the investor doing it than it does about the future prospects of the ETF itself. The investor choosing that approach clearly is comfortable with high risk/high reward speculation, almost to the point of Vegas gambling, and lacks the risk aversion and volatility aversion that keep most investors playing the widely diversified buy and hold investing game.

I am in the latter group, but I suspect that many perhaps younger and perhaps less experienced investors are in the former group like the ones who drive BTC, GME, and AI exuberant bull markets. 4 decades ago, I was in group one big time in the 1990s and made millions on individual stock tech bets. I was 100% tech, concentrated in the hottest stocks, no bonds, no value. When tech started tanking, I thought it was a head fake and bought more on margin. Why not? It was destined to be a long term winner and it was on sale. Before it was over, I some of those millions disappeared completely. That experience made a deep impression on me. I have been in group two ever since.

The thing that few investors realize is how limited is their insight into the future of the market's whims, which sectors and styles will win and which will lose over a given time period going forward. In my opinion, the luck of good timing or bad luck of its opposite, plus the determination to blindly keep investing regularly in spite of fear and bear markets--these things have a lot more to do with long term investing success than loading up on future winners and avoiding future losers. It is not possible to predict accurately at what the speculation game the big winners will become big losers. If you choose to go 100%, I wish you good luck. The thing that is hardest to figure out when you're winning at poker is when to take your chips off the table and walk away.

Garland Whizzer
rockstar
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Re: Investing 100% into TQQQ

Post by rockstar »

garlandwhizzer wrote: Tue Jun 11, 2024 3:14 pm 100% in a 3X QQQ concentrates maximally in what has been a dominant market segment, mega-cap tech), for a long time and it further leverages it up maximally. That is to say, it is the opposite of wide diversification by sector and style. That does not mean it is destined to fail over the investor's time frame. It could do just the opposite and the winning horse in the race could continue to keep winning well into the future. This approach carries much greater potential risk and likewise much greater potential reward than more diversified investing approaches. Many students of the market would argue that it's loading up maximally on the current risk of the most overvalued segment of the market, leveraging it up also, at precisely the wrong time in the last stages of a very long tech driven bull market. Historically these things don't go on forever. TQQQ investors might respond that they've been hearing that same tune for 15 and it's been dead wrong. The overpriced tech winners have kept winning and the very cheap value losers have been left in the dust.

No one at present knows with certainty which of these two opposite fates will win out going forward. Allocating 100% to TQQQ says a lot more about the investor doing it than it does about the future prospects of the ETF itself. The investor choosing that approach clearly is comfortable with high risk/high reward speculation, almost to the point of Vegas gambling, and lacks the risk aversion and volatility aversion that keep most investors playing the widely diversified buy and hold investing game.

I am in the latter group, but I suspect that many perhaps younger and perhaps less experienced investors are in the former group like the ones who drive BTC, GME, and AI exuberant bull markets. 4 decades ago, I was in group one big time in the 1990s and made millions on individual stock tech bets. I was 100% tech, concentrated in the hottest stocks, no bonds, no value. When tech started tanking, I thought it was a head fake and bought more on margin. Why not? It was destined to be a long term winner and it was on sale. Before it was over, I some of those millions disappeared completely. That experience made a deep impression on me. I have been in group two ever since.

The thing that few investors realize is how limited is their insight into the future of the market's whims, which sectors and styles will win and which will lose over a given time period going forward. In my opinion, the luck of good timing or bad luck of its opposite, plus the determination to blindly keep investing regularly in spite of fear and bear markets--these things have a lot more to do with long term investing success than loading up on future winners and avoiding future losers. It is not possible to predict accurately at what the speculation game the big winners will become big losers. If you choose to go 100%, I wish you good luck. The thing that is hardest to figure out when you're winning at poker is when to take your chips off the table and walk away.

Garland Whizzer
Pretty sure big money is moving stocks like GME. The volume numbers are way too high.
Topic Author
RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

muffins14 wrote: Tue Jun 11, 2024 8:50 am
RichIn7Years wrote: Mon Jun 10, 2024 7:34 pm Quick Update: Current Portfolio value: $290k, ~10% of this is my 401k. ~16% of the portfolio is in bonds - will rebalance this eventually, probably sometime before eoy or right at stat of next. Total return is ~80%. over the course of roughly 1.5 years (Note I have contributed a fair amount over the last 1.5 years). Luckily a lot of my original investment theses about AI have played out so far. Will see where this goes in the longer term.
It would have more sense to me if you invested in a tech fund or a fund of AI companies, or several individual stocks from AI companies. Tracking the NASDAQ just seems to muddy the waters to me. I never understood why people would be in favor of QQQ/TQQQ on a theoretical level
I did. I have a small amount in options on AI stocks which is why my returns exceed that of only tqqq. Tqqq is just safer than trying to guess if TSMC or NVDA is the one that will pop off.

It’s a pretty small amount because I’m under no illusions about my stock picking abilities. I also think we’re probably in a short term AI bubble, although not as overvalued as the dotcom one.

Also I have a fair amount of bonds. I’m trying to make money. The Kelly criterion just implies more leverage than most investors would be comfortable with.
muffins14
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Re: Investing 100% into TQQQ

Post by muffins14 »

RichIn7Years wrote: Wed Jun 12, 2024 12:03 pm
muffins14 wrote: Tue Jun 11, 2024 8:50 am
RichIn7Years wrote: Mon Jun 10, 2024 7:34 pm Quick Update: Current Portfolio value: $290k, ~10% of this is my 401k. ~16% of the portfolio is in bonds - will rebalance this eventually, probably sometime before eoy or right at stat of next. Total return is ~80%. over the course of roughly 1.5 years (Note I have contributed a fair amount over the last 1.5 years). Luckily a lot of my original investment theses about AI have played out so far. Will see where this goes in the longer term.
It would have more sense to me if you invested in a tech fund or a fund of AI companies, or several individual stocks from AI companies. Tracking the NASDAQ just seems to muddy the waters to me. I never understood why people would be in favor of QQQ/TQQQ on a theoretical level
I did. I have a small amount in options on AI stocks which is why my returns exceed that of only tqqq. Tqqq is just safer than trying to guess if TSMC or NVDA is the one that will pop off.

It’s a pretty small amount because I’m under no illusions about my stock picking abilities. I also think we’re probably in a short term AI bubble, although not as overvalued as the dotcom one.

Also I have a fair amount of bonds. I’m trying to make money. The Kelly criterion just implies more leverage than most investors would be comfortable with.
Why not leveraged VGT? Nasdaq has a lot of random stuff that's completely unrelated to tech. It's just a stock exchange.
Crom laughs at your Four Winds
Topic Author
RichIn7Years
Posts: 157
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

muffins14 wrote: Wed Jun 12, 2024 12:18 pm
RichIn7Years wrote: Wed Jun 12, 2024 12:03 pm
muffins14 wrote: Tue Jun 11, 2024 8:50 am
RichIn7Years wrote: Mon Jun 10, 2024 7:34 pm Quick Update: Current Portfolio value: $290k, ~10% of this is my 401k. ~16% of the portfolio is in bonds - will rebalance this eventually, probably sometime before eoy or right at stat of next. Total return is ~80%. over the course of roughly 1.5 years (Note I have contributed a fair amount over the last 1.5 years). Luckily a lot of my original investment theses about AI have played out so far. Will see where this goes in the longer term.
It would have more sense to me if you invested in a tech fund or a fund of AI companies, or several individual stocks from AI companies. Tracking the NASDAQ just seems to muddy the waters to me. I never understood why people would be in favor of QQQ/TQQQ on a theoretical level
I did. I have a small amount in options on AI stocks which is why my returns exceed that of only tqqq. Tqqq is just safer than trying to guess if TSMC or NVDA is the one that will pop off.

It’s a pretty small amount because I’m under no illusions about my stock picking abilities. I also think we’re probably in a short term AI bubble, although not as overvalued as the dotcom one.

Also I have a fair amount of bonds. I’m trying to make money. The Kelly criterion just implies more leverage than most investors would be comfortable with.
Why not leveraged VGT? Nasdaq has a lot of random stuff that's completely unrelated to tech. It's just a stock exchange.
VGT for whatever reason doesn’t have a lot of random tech stocks. The tech distinction decided by these funds is arbitrary
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

rockstar wrote: Tue Jun 11, 2024 3:48 pm
garlandwhizzer wrote: Tue Jun 11, 2024 3:14 pm 100% in a 3X QQQ concentrates maximally in what has been a dominant market segment, mega-cap tech), for a long time and it further leverages it up maximally. That is to say, it is the opposite of wide diversification by sector and style. That does not mean it is destined to fail over the investor's time frame. It could do just the opposite and the winning horse in the race could continue to keep winning well into the future. This approach carries much greater potential risk and likewise much greater potential reward than more diversified investing approaches. Many students of the market would argue that it's loading up maximally on the current risk of the most overvalued segment of the market, leveraging it up also, at precisely the wrong time in the last stages of a very long tech driven bull market. Historically these things don't go on forever. TQQQ investors might respond that they've been hearing that same tune for 15 and it's been dead wrong. The overpriced tech winners have kept winning and the very cheap value losers have been left in the dust.

No one at present knows with certainty which of these two opposite fates will win out going forward. Allocating 100% to TQQQ says a lot more about the investor doing it than it does about the future prospects of the ETF itself. The investor choosing that approach clearly is comfortable with high risk/high reward speculation, almost to the point of Vegas gambling, and lacks the risk aversion and volatility aversion that keep most investors playing the widely diversified buy and hold investing game.

I am in the latter group, but I suspect that many perhaps younger and perhaps less experienced investors are in the former group like the ones who drive BTC, GME, and AI exuberant bull markets. 4 decades ago, I was in group one big time in the 1990s and made millions on individual stock tech bets. I was 100% tech, concentrated in the hottest stocks, no bonds, no value. When tech started tanking, I thought it was a head fake and bought more on margin. Why not? It was destined to be a long term winner and it was on sale. Before it was over, I some of those millions disappeared completely. That experience made a deep impression on me. I have been in group two ever since.

The thing that few investors realize is how limited is their insight into the future of the market's whims, which sectors and styles will win and which will lose over a given time period going forward. In my opinion, the luck of good timing or bad luck of its opposite, plus the determination to blindly keep investing regularly in spite of fear and bear markets--these things have a lot more to do with long term investing success than loading up on future winners and avoiding future losers. It is not possible to predict accurately at what the speculation game the big winners will become big losers. If you choose to go 100%, I wish you good luck. The thing that is hardest to figure out when you're winning at poker is when to take your chips off the table and walk away.

Garland Whizzer
Pretty sure big money is moving stocks like GME. The volume numbers are way too high.
"manipulate" is the word that comes to mind. The people doing this via social media are not interested in finding good long term investments.

Whether it is now institutional investors (hedge funds) doing the trading volumes, or individuals, I don't know.

Garland Whizzer's discussion is one every young (and plenty of not-so-young) stock market "players" would do well to read - and all of us, generally.

I used to have a portfolio manager colleague who had a sign above his desk "Never mistake brains for a bull market".
rockstar
Posts: 6943
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Re: Investing 100% into TQQQ

Post by rockstar »

Valuethinker wrote: Wed Jun 12, 2024 12:22 pm
rockstar wrote: Tue Jun 11, 2024 3:48 pm
garlandwhizzer wrote: Tue Jun 11, 2024 3:14 pm 100% in a 3X QQQ concentrates maximally in what has been a dominant market segment, mega-cap tech), for a long time and it further leverages it up maximally. That is to say, it is the opposite of wide diversification by sector and style. That does not mean it is destined to fail over the investor's time frame. It could do just the opposite and the winning horse in the race could continue to keep winning well into the future. This approach carries much greater potential risk and likewise much greater potential reward than more diversified investing approaches. Many students of the market would argue that it's loading up maximally on the current risk of the most overvalued segment of the market, leveraging it up also, at precisely the wrong time in the last stages of a very long tech driven bull market. Historically these things don't go on forever. TQQQ investors might respond that they've been hearing that same tune for 15 and it's been dead wrong. The overpriced tech winners have kept winning and the very cheap value losers have been left in the dust.

No one at present knows with certainty which of these two opposite fates will win out going forward. Allocating 100% to TQQQ says a lot more about the investor doing it than it does about the future prospects of the ETF itself. The investor choosing that approach clearly is comfortable with high risk/high reward speculation, almost to the point of Vegas gambling, and lacks the risk aversion and volatility aversion that keep most investors playing the widely diversified buy and hold investing game.

I am in the latter group, but I suspect that many perhaps younger and perhaps less experienced investors are in the former group like the ones who drive BTC, GME, and AI exuberant bull markets. 4 decades ago, I was in group one big time in the 1990s and made millions on individual stock tech bets. I was 100% tech, concentrated in the hottest stocks, no bonds, no value. When tech started tanking, I thought it was a head fake and bought more on margin. Why not? It was destined to be a long term winner and it was on sale. Before it was over, I some of those millions disappeared completely. That experience made a deep impression on me. I have been in group two ever since.

The thing that few investors realize is how limited is their insight into the future of the market's whims, which sectors and styles will win and which will lose over a given time period going forward. In my opinion, the luck of good timing or bad luck of its opposite, plus the determination to blindly keep investing regularly in spite of fear and bear markets--these things have a lot more to do with long term investing success than loading up on future winners and avoiding future losers. It is not possible to predict accurately at what the speculation game the big winners will become big losers. If you choose to go 100%, I wish you good luck. The thing that is hardest to figure out when you're winning at poker is when to take your chips off the table and walk away.

Garland Whizzer
Pretty sure big money is moving stocks like GME. The volume numbers are way too high.
"manipulate" is the word that comes to mind. The people doing this via social media are not interested in finding good long term investments.

Whether it is now institutional investors (hedge funds) doing the trading volumes, or individuals, I don't know.

Garland Whizzer's discussion is one every young (and plenty of not-so-young) stock market "players" would do well to read - and all of us, generally.

I used to have a portfolio manager colleague who had a sign above his desk "Never mistake brains for a bull market".
This is big money blaming retail. No way is retail trading 100m+ shares a day.

Of course, there is always the narrative to knock people down that are doing really well.

How many people have you met that have turned $50k into $200m+ plus in less than a decade in a bull market?
unwitting_gulag
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Re: Investing 100% into TQQQ

Post by unwitting_gulag »

Valuethinker wrote: Sat Dec 09, 2023 11:49 am
james22 wrote: Fri Dec 08, 2023 7:36 pm Respect the most convenient state.

https://collabfund.com/blog/too-much-too-soon-too-fast/
(Schultz (of Starbucks) once reportedly told former WeWork CEO Adam Neumann to slow down growth and focus on quality metrics, to which Neumann responded, “**** that.” Some people learn this the hard way.)
Great citation and thank you!

Except:

1. Neumann blames this on Softbank and Massa Son for pushing him to grow too fast after Softbank invested billions (of Saudi money).

2. Neumann walked away with over $1bn personally. I think what he has "learned" is a "greater fool theory" about investors and their money. And he's started up again (contractually blocked from doing office space) and got lots of funding. PT Barnum would be proud.
Good points. A few lessons come to mind:

1. In speculative ventures, sometimes the instigators get their comeuppance, but sometimes not. There are examples either-way. In the above, Neumann didn't rise to epochal heights, but he did do very well regardless. His subordinates or fellow investors... probably not as much. So, occasionally we get a salubrious moral lesson. But on other occasions, we only learn to be cynical about the world.

2. The path to enormous riches isn't the same as the path to mere affluence. The latter isn't a consolation prize for the former. BH methods on a "normal" professional's salary will produce, in today's dollars, a handful of millions... eventually. They're unlikely to produce tens of millions. They're nearly impossible to produce hundreds of millions, within one human lifetime, in today's dollars. If we really want those hundreds of millions, we're going to have to do something spectacular... which unfortunately is likely to fail. We can't rely on slow-and-steady methods but then harbor a secret hope that they're also as a byproduct make us spectacularly rich.

3. There are reasonable guardrails for speculative things... "Kelly bets" or whatever is the salient term for limiting one's stake in a speculative venture, depending on payout, probability of gain/loss and so on. So it is possible to be dutifully responsible about small speculations on the side, while taking the slow-and-steady approach in the large. The result will be some blend of two. The speculative bit might go to zero, but it's a small loss, if the initial stake is small.

Mindful of (3), I think that a small position in QQQ, and an even smaller one in TQQQ, has merit.
Kbg
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Re: Investing 100% into TQQQ

Post by Kbg »

I've had between 25-34% in TQQQ since shortly after it came out and always mixed with low/negative correlated assets. Thus far it has worked well. It has done what I expected it to do. I'm also on record in several posts that I feel anything beyond 33% is just stupid.
Claudia Whitten
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Re: Investing 100% into TQQQ

Post by Claudia Whitten »

That is not investing. It's gambling.
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

rockstar wrote: Wed Jun 12, 2024 12:34 pm

This is big money blaming retail. No way is retail trading 100m+ shares a day.

Of course, there is always the narrative to knock people down that are doing really well.

How many people have you met that have turned $50k into $200m+ plus in less than a decade in a bull market?
None, to be exact.

I used to know some fund managers who made 100x on Personal Account trading. Sometimes that was so close to insider trading that I am (cynically) amazed they were never caught.

I think most of these stories about vast fortunes made on Personal Account trading are just that, stories. Or the balance of probabilities suggests that there will be a few such individuals.

If one has that much skill why not start a hedge fund? The next Renaissance Technology?

There's a heck of a lot of manipulation that goes on out there. Gamestop being a classic case.

The wise investor would be wary. There cannot be an easy path to riches via Reddit sub-boards. Unless one has access to truly inside information.
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

Claudia Whitten wrote: Thu Jun 13, 2024 2:46 am That is not investing. It's gambling.
The line is fuzzier than we like to think.

Because equities as an asset class are capable of throwing up just an incredible range of returns. From the sort of minus 80% real (annualised) the London stock market pulled at one point in the early 1970s (without wars, revolutions etc that send stock markets to zero). Up to the nearly +100%.

The pattern of daily price moves is fractal-like. i.e. scale invariant. Really big moves are possible and occur with higher proportion than the convenient assumption of a Gaussian (normal) distribution would say. Aka "fat tails".

Recent success is no guarantee of future success by equity markets, unfortunately.

So to add risk on top of that general risk, is like going to the roulette table and betting all your winnings, again.
rockstar
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Re: Investing 100% into TQQQ

Post by rockstar »

Valuethinker wrote: Thu Jun 13, 2024 4:04 am
rockstar wrote: Wed Jun 12, 2024 12:34 pm

This is big money blaming retail. No way is retail trading 100m+ shares a day.

Of course, there is always the narrative to knock people down that are doing really well.

How many people have you met that have turned $50k into $200m+ plus in less than a decade in a bull market?
None, to be exact.

I used to know some fund managers who made 100x on Personal Account trading. Sometimes that was so close to insider trading that I am (cynically) amazed they were never caught.

I think most of these stories about vast fortunes made on Personal Account trading are just that, stories. Or the balance of probabilities suggests that there will be a few such individuals.

If one has that much skill why not start a hedge fund? The next Renaissance Technology?

There's a heck of a lot of manipulation that goes on out there. Gamestop being a classic case.

The wise investor would be wary. There cannot be an easy path to riches via Reddit sub-boards. Unless one has access to truly inside information.
Different skill set. A hedge fund is about making money off of insecure rich people, not returns. It’s all sales.

On the individual stock level, the market is one big casino that barely has enough regulation. And it’s definitely short on regulators.
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FoundingFather
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Re: Investing 100% into TQQQ

Post by FoundingFather »

RichIn7Years wrote: Mon Jun 10, 2024 7:34 pm Quick Update: Current Portfolio value: $310k, ~10% of this is my 401k. ~16% of the portfolio is in bonds - will rebalance this eventually, probably sometime before eoy or right at stat of next. Total return is ~80%. over the course of roughly 1.5 years (Note I have contributed a fair amount over the last 1.5 years). Luckily a lot of my original investment theses about AI have played out so far. Will see where this goes in the longer term.
I appreciate you being candid and updating the community. Please continue to do so! :D

Market Timer's thread, a similarly themed discussion in which someone confidently presented an idea to the forum, was roundly criticized, and whose idea disastrously failed has been a great source of learning for many investors. Either you will prove everyone wrong and succeed, which would be awesome for you and important for the community to note, or your idea will fail and you can be an object lesson for years to come. Either way, you posting your adventure is a great addition to the forum, so thank you for doing it - I'm excited to follow along!

Founding Father
"I do not think myself equal to the Command I am honored with." -George Washington (excerpt from Journals of the Continental Congress, 16 June 1775)
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